Is Debt Restructuring Right For You?

debtDebt is the real D-word. Most of us fall into the debt trap at least once in our lives. Debt can occur on all levels, from owing $1,000 on a credit card to owing $35,000 on your car payments. When someone—whether a bank, friend, investor, or government agency—loans you money that must be paid back, it’s a debt.

The most common forms of debt in America are usually credit card debt, car loan debt, and mortgage debt. In these situations, money is meant to be paid back in installments over a certain number of years. However, if you have accrued so much debt that your finances are stifled by monthly payments and you can’t seem to make ends meet, debt restricting might be the best way for you to turn.

What is Debt Restructuring?

Debt restructuring is a debt relief option that involves taking a new loan to pay off a variety of creditors at once, and then paying just that new loan off in installments. This is a smart system in the sense that it allows you to clear away existing debt, eliminate multiple monthly payments, and ideally pay a lower interest rate on the remaining debt.

Are there Problems with Debt Restructuring?

Unfortunately, yes. Any time money—and a lack thereof—comes into the equation, there is always a downside. Most people with excessive debt are desperate to get themselves out of hot water and are willing to make a deal with the devil in order to achieve temporary relief. This leads to a few common pitfalls.

First, don’t just focus on the monthly payment of the new restructured debt payment. Look at the overall cost of the loan. Most debt restructuring companies will take advantage of your situation and charge unbelievable interest fees while extending the life of the loan in order to earn more from you in the end.

Second, don’t forget to shop around. Never sign loan papers the same day that you apply for a loan; look around, use online resources, and find the deal that will give you the best restructuring deal.

Since this is a complicated process, it’s even better to find a bankruptcy lawyer who can walk you through it step by step and make sure you don’t end up in a restructure that will hurt you even more.